Insurance mis-selling could lead to commission clawbacks under proposed changes to the insurance distribution framework, according to a Kotak Institutional Equities report. The analysis follows the Insurance Regulatory and Development Authority of India’s (IRDAI) consultation paper on recalibrating insurance distribution economics, which proposes stronger accountability for distributors and greater alignment between remuneration and policyholder outcomes.
The proposed framework includes tighter controls around commission structures, mis-selling, sales incentives and distributor conduct. Kotak expects commission clawbacks to become an important mechanism for addressing mis-selling, potentially requiring distributors to return commissions where policies are cancelled or customer outcomes indicate inappropriate sales practices. The proposals also seek greater traceability of individual sales and stronger oversight of distribution channels, including banks and non-bank financial companies.
For insurers and intermediaries, the proposed changes could make sales quality and post-sale customer outcomes more important alongside premium volumes. Distribution businesses may need stronger documentation, monitoring and compliance controls to demonstrate that products are appropriately sold and serviced. The consultation remains subject to stakeholder feedback, with comments invited by October 25, 2026, before IRDAI finalises the framework.
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